Home health giant Amedisys Inc.’s shares plummeted more than 23 percent Tuesday after the company reported a $574.1 million write-down of assets and the departure of its chief operating officer.
Amedisys, which operates with 600 employees from its headquarters on South Sherwood Forest Boulevard and has more than 16,000 employees nationwide with more than 500 home health and hospice agencies in 45 states, cited its crumbling market capitalization, disappointing third-quarter financial results and recent forecasts in taking the $574.1 million, non-cash, goodwill charge.
That resulted in the company posting a $423.7 million loss for the quarter, or $14.73 per share.
Excluding the charge, Amedisys’ third-quarter earnings would have been $10.6 million, or 36 cents per share, nearly 60 percent lower than the $25.5 million, or 89 cents per share, recorded a year ago. The results also fell short of the 50-cents-per-share forecast by stock analysts surveyed by Thomson Reuters.
Amedisys shares closed Tuesday at $10.06, down $3.07, or 23.4 percent. It was the stock’s lowest price in seven years.
The company’s seven-year streak of record earnings ended in 2010, after a Wall Street Journal analysis raised questions about publicly traded home health companies’ billing practices. Since then, the company’s stock has slipped from $60 a share to its current level.
Amedisys said it also plans to close, consolidate or sell 50 of its care centers due to disappointing performance and looming cuts in federal Medicare reimbursements.
However, Brian Tanquilut, stock analyst at Jefferies and Co., said the big news was Chief Operating Officer Michael Snow’s abrupt departure.
“He was known as a really clean guy. He brought a lot of street cred to Amedisys, the street being Wall Street,” Tanquilut said.
Snow had established his credentials through an excellent portfolio of work in the health-care industry, including stints at HCA Inc. and HealthSouth Corp., Tanquilut said. Now that Snow is gone, the question of “management integrity” is again popping up in investors’ minds.
Before the appointment of CFO Dale Redman five years ago, Amedisys inability to keep a chief financial officer for any length of time made investors uncertain about the company’s stability, Tanquilut said. Tuesday’s management shakeup announcement was a reminder of those earlier problems, he said.
Amedisys said Redman will move to executive vice president and treasurer Jan. 1 in anticipation of his retirement during the first quarter.
Ronald LaBorde, Amedisys’ lead board member, became company president effective Tuesday and will take Redman’s place as CFO on Jan. 1.
Tanquilut said he was not familiar with LaBorde’s background.
“He’s the CEO of an HR consulting company, but I don’t know if he necessarily has the skill set to be the CFO of the nation’s largest home nursing provider,” Tanquilut said.
LaBorde’s experience includes serving as chief executive of Piccadilly Cafeterias Inc. from 1995 to 2003. LaBorde resigned five months before the cafeteria chain sought bankruptcy protection and was sold to a Los Angeles-based partnership.
For now, Amedisys’ stock remains a “show-me story,” Tanquilut said. Even though the stock is cheap, there’s no rush to buy it because there are too many unknowns.
On the plus side, the company doesn’t have a lot of debt, he said. But Amedisys’ management team, including Chief Executive Officer William Borne, will have to prove itself to investors before anyone meaningful buys the stock.
Borne founded the company locally in 1982 and took the company public in 1993 as an over-the-counter-stock.
Jefferies doesn’t do investment banking business with Amedisys or own its stock, Tanquilut said.
In a news release, Borne said Amedisys was lowering its 2012 guidance after the lower-than-expected third-quarter results.
The non-cash impairment charge applies to Amedisys’ goodwill, or intangible assets. Those assets can include a strong brand name, good customer relations, good employee relations and patents or proprietary technology.
Amedisys lowered its overall 2011 earnings projections to between $1.90 and $2 per share, with revenue of $1.475 billion to $1.50 billion. Analysts had forecast earnings of $2.39 per share on revenue of $1.48 billion. In August, Amedisys lowered its 2011 guidance to between $2.20 and $2.40 per share from the range of $3-$3.30 per share.
Borne also said the company made a number of strategic decisions aimed at realigning the company to better address performance and position the company for future success.
Sheryl Skolnick, managing director of CRT Capital Group LLC, said the write-down amounted to 41 percent of the company’s book value, or shareholders’ equity, in Amedisys, but the write-off might not be large enough.
More write-offs may be coming because the Medicare payment environment is getting worse, Skolnick said.
The vast majority of Amedisys’ patients are covered by Medicare. On Monday, the Centers for Medicare & Medicaid Services announced that home health payments would be cut by 2.3 percent overall in 2012.
Despite Tuesday’s stock plunge, which brought shares to little more than a quarter of their February levels, Skolnick said Amedisys’ stock remains overvalued.
“I have an $8 target price on it. I think that might be generous,” she said. “This is a business in disarray at the least … I think with more reimbursement cuts coming down the pike, it is going to get a whole lot worse before it gets better.”